Loan Backers Lawsuit

Mortgage Lenders Network pays $855,000 bankruptcy settlement for unfunded mortgages.

Loan Backers

Philadelphia, PA: (Nov-14-07) Federal regulators in Connecticut, Michigan, New Hampshire, and Ohio brought charges against failed subprime operator Mortgage Lenders Network USA Inc., alleging that its backers had shut off cash, leaving it unable to fund mortgages it had committed to make. Records show that the regulators ordered the company out of the lending business and threatened it with millions of dollars in fines. The Middletown-based company collapsed earlier in 2007, selling its assets to raise cash for creditors. Though the company is not seeking to recover its licenses, it stated that it wanted to avoid continued regulatory action.

As part of a settlement reached, Mortgage Lenders agreed to pay Connecticut an $845,000 claim in the bankruptcy case. New Hampshire would receive a $10,000 bankruptcy claim under the proposed settlement, and has agreed to cancel proceedings that could lead to $275,000 in penalties. Connecticut had threatened to fine the company up to $7.6 million for a series of alleged wrongdoing, from failing to fund loans to failing to register some of its loan-making employees, according to documents on file at the Connecticut Department of Banking. The settlement reached with it seeks to end Connecticut's action in exchange for giving the company's home state regulators an $845,000 claim. [FORBES: MORTGAGE BANKRUPTCY]

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